I dropped him a couple weeks ago. He's still a FA too incase I feel like picking him up.
News from Yahoo on May 21:
Schmidt is still not ready to return to the rotation, but appears to be making progress. Continue to monitor the developments in case he has a set back. A minor league rehab stint could be coming.
Jason Schmidt (shoulder) reportedly threw with more velocity than he has had anytime this season during a side session on Tuesday. Schmidt is expected to pitch a simulated game on Friday. He will pitch in two or three simulated games before beginning a minor league rehab assignment.
So I guess this answers the question as to whether or not he's getting his velocity back.